Obama vs. McCain: Economics

The first of many posts, no doubt, here is a quick breakdown of some important economic differences between John McCain and Barack Obama.

This WSJ article has done a good job of laying out the differences, although I am sure positions will change as we approach November.

Concerning taxes, Obama is following the traditional Dem policy: lower taxes for middle class, and raise for the wealthy. In terms of business, Obama wants to support a capital gains tax on private equity and hedge funds, and an overall raise for capital gains and dividend tax rates from 15% to somewhere between 20% and 25%.

Now hedge funds and PE shops are pretty easy targets for politicking liberals. They have gotten some bad press (I remember reading a lot of griping over the winter) about the meager taxes they pay, relative to other financial companies. However, as David Rubenstein, co-founder of Carlyle Group, noted, private equity has grown to be an incredibly important part of the US economy, and is one of the last bastions of US business dominance. Furthermore, private equity has largely been financed by investments from pension funds, who have grown dependent on PE's high returns; so taxation would inadvertently hurt retirees dependent on their pensions.

McCain wants to lower the corporate tax from 35% to 25%, and require a 3/5 majority in Congress to raise taxes in the future. McCain cap gains and dividends tax the same as it is. This would (probably) do a lot of good to foster growth in our near-recessionary economy (although the verdict is still out on whether or not this "recession" is limited to housing and finance).

In terms of trade, the Journal suggests that this is a matter of pro- and anti-globalization, although that may be putting words in Obama's mouth, who is arguably anti-globalization. Trade hasn't been much of an issue recently, as exports are up 15.5% this year (probably due to our weak dollar more than anything else).

Obama said in Pennsylvania in April that “trade should work not just for some Americans, but for all Americans, not just for Wall Street, but for Main Street,” and is a proponent of including labor and environmental provisions in trade agreements with other countries. Elsewhere, Obama has promised that he “will fight for a trade policy that opens up foreign markets to support good American jobs,” although I have no idea how he expects that to happen, as opening up foreign markets would do anything but support costly American jobs.

McCain expresses a much less isolationist rhetoric, stating that "the U.S. should engage in multilateral, regional and bilateral efforts to reduce barriers to trade, level the global playing field and build effective enforcement of global trading rules." The result of this rhetoric is theoretically healthier and more competitive multinational corporations (many of which are based in the US), as well as raising the standard of living in developing countries through increased foreign direct investment (a good thing).

Now as a good college student, I am naturally leaning towards Obama, and look forward to seeing how his rhetoric (hopefully) shifts towards the center as debate heats up between the two. It is worth mentioning as well that McCain is notoriously ignorant of economics, which is also pretty disappointing.

And something of a surprise, guess who Mr. Murdoch is leaning towards....